1. MEMORANDUM
TO: Members of the Senate Budget Committee
FROM: Nicole Fenton
DATE: January 7, 2013
RE: Senate Bill No. 2893
On the behalf of the New Jersey Business and Industry Association (NJBIA), I
would like to express our opposition regarding Senate Bill 2893 (Madden, Beck).
This act amends details the regulations of home improvement contractors in order
to ensure utmost protection to the consumer and amends P. L. 2004, c. 16. The law
passed in 2004 expounds that before performing, engaging, or attempting to engage in a
in making or selling home improvements, all contractors are required to register every
two years with the Division of Consumer Affairs in the Department of Law and Public
Safety and calls for the provision of an amount of commercial general liability insurance
regulated by the Director of the Division of Consumer Affairs. The effect is to protect
the resident receiving the home improvements.
Bill 2893 further extends the legislation found in P. L. 2004, c. 16. It specifically
adds an additional regulation that contractors must have a bond issued by one or more
sureties in order to execute business in the state as an added insurance for their projects.
It also removes an exemption to contractors whom have already registered with the
Department of Community Affairs pursuant to the New Home Warranty and Builder’s
Registration Act but only in relations to the building of a new home.
Although the added regulation of the bond was meant to have good intentions, it
may result in negative ramifications in regards to the consumer receiving the home
improvements. The extra bonding regulations add red tape and bureaucracy, which can
potentially hold up the pricing of jobs. It involves an increased amount of paperwork and
delays the processes before a contractor can begin a project.
The bonding requirement can easily dissuade smaller contracting companies from
partaking in home improvements attributable to the expense. Smaller companies may not
have the collateral, qualifications, or high credit to purchase bonds from bank each time
there is a new project. Banks and insurance companies are far more interested in larger
breadth and scale companies with fully equipped and highly experienced contractors,
credible references, and an established bank relationship. The elimination of smaller
companies creates a decrease in competition among contracting companies, therefore
leading to a higher consumer price caused by decreased supply. The added requirement
of bonds drives up the costs for the clients and also puts unregistered contractors at an
advantage over the contractor following the law.
2. Contractors must register with the Division of Consumer Affairs in the
Department of Law and Public Safety unless they fall under the exemptions listed under
section three. One colliding issue is the removal of the exemption for those registered
under the New Home Warranty and Builder’s Registration Act when building a new
home. The exemption was created to avoid duplicate registration requirements and fees,
yet also to identify contractors for enforcement purposes. Removing this exemption
would create confusion since there would be multiple registration records. It would also
add additional unnecessary costs without providing any more protection to the consumer.
When supplementing a law with a new bill, the top priority of protecting the
consumer should always remain the goal. In regards to the bonding requirement, adding
extra regulations might be increasingly harmful to the client by increasing costs and
delaying the pricing process. The removal of the exemption for those registered under the
New Home Warranty Act would cause only confusion and no aid to the consumer. That
is why the New Jersey Business and Industry Association asks that the amended
components of this bill be reviewed for impact on consumer protection.
Thank you for your consideration of our concerns.